Virtual Economies in Virtual Worlds

Most of the virtual worlds either currently have all or are considering implementing virtual economies. Virtual economies within virtual worlds mirror real-life in that money becomes a means of motivation, exchange of goods and services, and adds to the overall fun of living in a virtual world.

There are two types of markets within virtual worlds. The first is the primary market that exists within the virtual world where money is spent. The second economy is the aftermarket for virtual goods and services. For example, the aftermarket to buy gold from World of Warcraft or avatars which are no longer available in the primary world.

Projections are that the secondary market for virtual goods will grow to be between $5 and $10 billion within four years. The secondary market is estimated to be five to 10 times smaller than the primary market. Therefore, the economy of the primary virtual world economy is will be between $25 and $100 billion within the next four years.

Right now, there is still a subscription model in virtual worlds. Expect this to rapidly change as all virtual worlds move to micro-payments within virtual worlds rather than subscription-based payments.

The virtual worlds are searching for ways to accommodate micro-payments within the virtual economy. Credit cards and traditional processing services tend to be very expensive for micro-payments. Using mobile phones for payments will rapidly overtake the use of credit cards for payments within virtual world economies.